WWM - Analytics

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    Today’s Trading Edge: Amazon shares plunge after Q4 earnings miss

    WWM_AMZN_JAN_28_2016.jpg

    Amazon.com Inc (AMZN) shares dropped around 15% after a disappointing profit was hurt by increased spending on new technology and delivery services. The company reported net income of $1.00 a share, much lower than the analyst consensus of $1.60 a share. Revenue also missed with $35.7 billion in sales, lower than the expected $35.9 billion. Investors were puzzled over why earnings only increased by $0.55 a share, when revenue climbed $6 billion when compared to the same quarter year over year.

    Price action on the Amazon 240-minute chart shows the after-hours drop coincided with a bearish Gartley pattern that formed 30-minutes prior to the US close. Point D was confirmed with both 61.8% Fibonacci retracement of the X to A leg and the 200.0% Fibonacci expansion level of the B to C move. The slide is now tentatively finding support with the $550 support region. If we see further pressure price may eventually target $522.46, which is the 127.2% Fibonacci expansion level of the A to D move. It is around that area that we may look for value investors to start scaling into positions.   

    If the current slide is short-lived, initial resistance will come $585 resistance level.    

    The Trade: Buy AMZN at $525, with a stop loss at $495 and a take profit at $585.  The Risk/Reward Ratio is 1:2


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